Chet Shah says the UK is narrowing the gap between its digital asset regulation aspirations and policy reality, marking a significant shift in the nation’s approach.
Coordinated announcements from the Financial Conduct Authority (FCA) and the Bank of England (BoE) indicate a more pragmatic path forward for the sector, which is moving toward a comprehensive UK crypto regulation regime set for full enforcement in October 2027.
Bank of England revises earlier stablecoin proposals
The regulatory evolution aligns with the finalization of a framework that expands oversight to include trading platforms, custodians, stablecoin issuers, and staking intermediaries. By adopting a “same risk, same outcome” approach, the government intends to apply existing financial services rules to the sector. This effort to foster institutional credibility comes as investor sentiment shifts toward long-term digital asset holding and regulated market infrastructure.
A central component of this transition involves the Bank of England’s treatment of sterling-denominated systemic stablecoins. Initially, the central bank had proposed restrictive holding limits of £20,000 for individuals and £10 million for businesses in November 2025. These plans faced strong industry backlash, with critics arguing the caps were too conservative to allow stablecoins to be utilized for large-scale payments and payroll.
In response to industry feedback, the Bank of England has scrapped the previously proposed holding limits. It has also lowered the reserve requirement for issuers from 40% to 30% to ensure these assets remain commercially viable.
These adjustments follow broader market trends where stablecoin issuers like Tether have seen their products integrated into global settlement systems, necessitating a more flexible regulatory stance to maintain British competitiveness.
Despite these easements, the Bank maintains a £40 billion cap on the circulation of any single systemic sterling stablecoin. CEO Chet Shah noted that this remains a small figure compared to the market capitalization of global giants like USDC or USDT.
However, the Bank of England has signaled an intention to revise or remove this cap as digital assets become more embedded in the wider financial system, provided they do not pose a threat to financial stability.
Comparing global regulatory standards
The UK’s movement toward clarity comes as other jurisdictions implement their own enforceable standards. The European Union’s Markets in Crypto-Assets (MiCA) framework has already seen Euro stablecoin transfer volumes grow from $270 million to $8 billion monthly.
Similarly, the United States has introduced the GENIUS Act, which replaces a patchwork of state and federal guidance with enforceable standards for reserve assets, redemption rights, and custody. While the UK trailed earlier, legislative progress in other regions has accelerated the British timeline for finalized rules.
The Financial Conduct Authority finalized its crypto rules last month, providing guidance on capital requirements, admissions, and disclosures. These rules aim to resolve issues with the “FinProm” framework, which historically complicated how firms marketed products to UK consumers.
By providing a clearer conduct framework, the FCA hopes to improve authorization times and attract talent to the London fintech sector, which has faced recent hurdles from banks blocking customer transactions to crypto exchanges.
Implementation timeline for the new regime
The path toward the October 2027 enforcement date includes several upcoming milestones. The industry is currently preparing for a series of consultations for feedback before the new rules become mandatory for any firm operating in the country.
Regulatory documents indicate that firms will need to be authorized by the FCA to carry out specific cryptoasset activities, a process designed to manage financial stability risks while supporting safe innovation within the digital economy.
Government bodies, including HM Treasury (HMT), have laid the legislative groundwork through the Financial Services and Markets Act 2023 (FSMA 2023) and the Cryptoasset Regulations 2026. These measures explicitly brought digital assets within the regulatory perimeter.
Further guidance on Decentralized Finance (DeFi) and the tax treatment of digital assets remains in development, with consultations expected later this year to ensure the framework covers the entire scope of the digital asset market.
Political transitions and policy continuity
Regulatory progress now faces a period of political transition in Westminster. Following the resignation of Prime Minister Keir Starmer, a new Labour leader is expected to take office within weeks.
This transition will serve as an early test for the UK’s crypto ambitions, as the industry seeks continuity to ensure the regime does not become a “political football.” The goal remains to prevent the sector from facing the same political polarization seen in other major jurisdictions.
Ultimately, the coordinated steps by the Bank of England and the FCA represent a maturation of the UK’s strategy. By incorporating industry feedback and moving away from the “overly cautious” stance of the past, regulators are attempting to strike a balance between consumer protection and innovation.
Whether this momentum can be sustained through a change in leadership remains to be seen, but the completion of the FCA’s crypto roadmap marks a significant step toward the UK becoming a global leader in the digital economy.